The ARM Business Model

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EXECUTIVE SUMMARY 2
INTRODUCTION 3
THE INDUSTRY PERFORMANCE 3
DAVID VS GOLIATH 4 MONEY FOR THE NEW HORIZON 6
THE STRATEGY 7
Figure 1. ARM business model 8 WHERE NOW? 9 BIBLIOGRAPHY 10

APPENDIX 11 Figure 1. Details relating to mobile application processors to ship or sample during 2012 11 Figure 2. ARM holdings PLC: Summary of Finance 12 Figure 3. ARM revenue sources 13 Figure 4. Gartner-Hype-Cycle 14

Executive summary

The economic downturn had an impact on the semiconductor industry but the latest estimates are showing signs of recovery. While Intel is controlling this industry, the microprocessor, the semiconductor end market with a $ 313 billion market and strongest demand is controlled by ARM, a small British firm with a different business strategy than Intel.

The latest details about the Intel’s mobile processor have ignited ideas among users and stakeholders. Is this ARM’s end?

No. Comparing Medfield, Intel’s first SoC with ARM’s based application processors (see appendix, figure 1) fails on every comparison. Intel has a long way ahead to catch up with ARM’s microprocessors. The British company will maintain dominant market share in smart phones and tablets because of a superior tradeoff between performance and power consumption.

In a David vs Goliath battle, ARM has the resources and innovation to surpass Intel globally. The ARM strength is not the technology but the ecosystem, which gives a competitive advantage over its rivals. A federation approach of a business model with hundreds of producers, designers, tools that leads to an innovative ecosystem is a success factor for the industry.

Can a company with a manufacturing need really scale a business through an ecosystem?

Risks to ARM Holdings include the cyclical nature of the semiconductor industry, competition from Intel and MIPS, quarter-to-quarter license revenue volatility, and a heavy reliance on consumer/enterprise spending to grow royalty units. At the lunch of Medfield mobile processor information on 8th of February 2012 Intel made it clear that is moving into ARM’s domain. The announcement affected ARM’s share price on the stock market and people start speculating on the company’s future position in the microprocessor industry. Section one of this report will look into the semiconductor industry performance and the future estimates. David vs Goliath section illustrates the ARM ‘s contextual situation and analyses the competitive stance of the company in report to Intel, the main competitor while section 3 and 4 explains the strategic and financial resources and the value chain of ARM. Last section provides a conclusion and a personal opinion of ARM’s strategy.

The industry performance
While the European debt uncertainty seemed to wane heavily on consumer spending during last year, the semiconductor industry giants are hopeful the worst is behind us and the US economy is not heading into its second recession in four years. The industry’s performance depends upon customer demand. The three pillars of semiconductor consumption include: •Consumer spending on electronics goods,

Enterprise IT hardware spending,
Carrier capital spending plans (wireless and wire...
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